=+LG 2 P16–5 Borrow or pay cash for an asset Antonio is considering renovating his apartment in Milan. He visits Meridiani and looks at different bedroom furniture sets. The bedroom sets are generally very expensive, and even though he has the cash to pay for one, he is thinking about getting a loan and not exhaust all his savings.

The bedroom set Antonio selects costs €10,000, and Meridiani offers a financing plan that would allow Antonio to either (1) put 20% down and finance the balance at 6% annual interest compounded monthly over 60 months or (2) receive an immediate €500 cash rabate.

Antonio currently earns 2% annual interest rate compounded yearly on his savings in a bank.